What is Legal Expenses Insurance (LEI)
- Sam Cornelius
- Sep 27, 2021
- 3 min read
Updated: Oct 9, 2021
Legal expenses insurance can be split into two distinct categories, BTE and ATE. In this insight piece, we take a brief look at what BTE legal expenses insurance is and what is does and does not commonly cover. If you're interested in ATE legal expenses, I will write a separate introduction on this in the future.
What does BTE mean?
BTE stands for "Before-The-Event" and simply means that the insurance covers you for actions before they actually take place (i.e. the insured event must happen in the future). This may seem like common sense, so why state it at all? Because of the somewhat unique way the English legal system works regarding case funding, many LEI providers also offer ATE, or "After-The-Event" products. Therefore, you will find providers break products into BTE and ATE offerings.
What does LEI cover?
Traditionally, legal expenses is not a sort-after product in and of itself. Instead, LEI is most often sold as an add-on product to more common policy types such as commercial property or packages insurance. Despite this, research has shown around 25 million households had LEI cover in 2020, and the legal expenses market is worth nearly half a billion pounds.
LEI covers a wide range of common legal disputes and is available to both commercial and consumer clients. Some common matters LEI covers are:
Employment disputes
Landlord and tenant disputes
Contract disputes
Pursuit of claims against faulty goods or workmanship
Debt recovery
Tax disputes and investigations
Pupil admissions appeals
Loss of earnings to appear at a court or hearing etc.
Pursuit of personal injury claims
LEI is also available to motorists and covers matters such as:
Recovering uninsured losses
Personal injury claims
Excess protection
Cover usually ranged from anywhere between £50,000 to £250,000 per claim, although many insurers have upper limits of £500,000 or more. Some policies may have aggregate limits on claims such as employment disputes, which can usually range from anywhere between £500,000 to £2m or more.
What are some common exclusions?
The most common feature of an LEI product is a "reasonable prospect of success clause" and, put simply, these clauses require any claim under the policy to have a 51% or greater chance of success throughout the life of the claim (as assessed by a qualified solicitor). Claims that fall under this margin are commonly declined. Some more advanced products are available without this exclusion, but these are significantly more costly.
Another common feature is the use of panel solicitors. This can be quite a controversial topic and is often a reason many are put off purchasing LEI insurance or who pay extra to ensure their chosen solicitor is used throughout the entire process.
A panel solicitor is a firm that has an existing relationship with the insurer, and an agreement in place that they will handle claims for that insurer at an agreed rate, usually lower than the market rate. This helps an insurer keep costs (and therefore prices) down. However, many speculate that because of the bulk nature of the work, claimants often are assisted by lesser qualified or unqualified members of the law firm, such as trainees and paralegals and there have been arguments this leads to worse customer outcomes.
However, policyholders do have a right to freedom of representation at the point legal proceedings start, and in the last decade several court cases have successfully challenged unfairly restrictive terms on representation (see, for example, Brown-Quinn v Equity Syndicate Management Ltd [2012]). However, be aware that LEI providers do not usually pay more than their own panel rates if you do use your own provider.
That being said, most leading law firms can be found on an insurers panel, and many insurers are able to devise innovative solutions to claims resolution because of their close relationships with partner firms.
Some other common exclusions include:
Fines and penalties
Intellectual property disputes
Pre-existing legal matters
Further Information:
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